Rostelecom won’t allow foreign shareholders on security concerns

Rostelecom, Russia’s biggest telecommunication group, will reportedly not allow foreign investors into its $5 billion privatization. The Russian state insists it should retain controls over such a strategic asset.

Sale of the state’s 55.2 percent of Rostelecom voting stock has
become a matter of discord between Russia’s Ministry of Economic
Development and the Ministry of Defense. Under the privatization
plan the government should relinquish its Rostelecom shares by
2016, earning an estimated $5 billion in the deal.

The nationality of buyers seems to have become a concern for the
country’s Ministry of Defense. At the moment “it’s necessary
to understand … whether it’ll effect our security,”
Kommersant quotes its sources in the Ministry.

In 2012, when the Presidential decree for the incorporation of
Svyazinvest into Rostelecom was being prepared, the Ministry of
Defense, the Federal Protective Service, as well as the Federal
Security Service stipulated that the state must maintain control
over Rostelecom.

“Given the strategic importance of the consolidated Rostelecom
for the defense capacity and security of the State (the mentioned
above ministries) think loss of the government controls over the
joint company is unacceptable,” Kommersant reported.

Now Russia’s government is discussing a compromise plan for
Rostelecom privatization.

“It’s possible to agree with the members of power ministries
if we forbid foreigners to buy (Rostelecom shares),”
Kommersant quotes a high ranked Russian bureaucrat as saying.

Rostelecom privatization is most likely to be limited to Russia’s
big troika of telecom operators – MTS, Megafon and Vympelcom, the
source added.

At the moment the state’s companies – Svyazinvest Holding and
Vnesheconombank – own a total of 55.2 percent of Rostelecom
voting shares. Rostelecom capitalization at the RTS-MICEX floor
is at around $8.9 billion.